Centerra jumps on resource, reserve update

TORONTO (miningweekly.com) – Shares in Toronto-based Centerra Gold rose more than ten percent on Tuesday, after the company issued a year-end resource and reserve update and commented on the situation regarding its licences in Mongolia.

Centerra owns the Kumtor mine, in Kyrgyzstan, and the Gatsuurt project in Mongolia. The firm ended operations at another Mongolian mine, Boroo, in November and had planned to replace the production with ore from Gatsuurt, which is located about 50 km away, but has not been able to start up because of uncertainty over the implications of a new water and forests law in Mongolia.

The company said it increased total proven and probable reserves by 1,7-million ounces in 2010, before accounting for 2010 production, to 8,2-million ounces of gold.

Measured and indicated resources rose by 739 000 oz year-on-year, to 4,9-million ounces of gold.

Centerra also outlined a new mine plan for the openpit at its Kumtor mine, which has been extended by two years, until 2021.

Output from Kumtor should increase by some 500 000 oz by 2015, the company said.

MONGOLIA LICENCES

Centerra also said on Tuesday it is optimistic that the potential benefits to Mongolia from its operations should result in the new legislation having a "limited" effect on the firm's operations.

The company is waiting to hear how the project will be affected by a new water and forests law enacted in Mongolia and the final permitting for its Gatsuurt mine will not be approved until the uncertainty under the new law is dealt with.

The Mongolian Cabinet said in November it would start revoking almost 1 800 mineral licences under the new law, starting with 254 alluvial gold mining licences, of which four are held by Centerra.

The company pointed out at the time that none of the four were material to its business and said that the prinicpal Gatsuurt hardrock licences were not on the list.

The government has said that it plans to propose that certain deposits in the country be designated as “strategic”, and will revoke and provide compensation for hundreds of exploration and mining licences.

Centerra said this week that 36 of its 55 licences, including the Gatsuurt hard-rock licences, are included in the cabinet list identified for staged revocation.

The company said it understands that the water and forest law will take until around November 2012 to fully implement, and noted that the legislation has attracted opposition from alluvial miners, the Mongolian National Mining Association and other groups.

The government has said it expects to pay out about $4-billion in compensation to mining companies whose licences are revoked, “which is about equal to Mongolia's annual gross domestic product”, the firm said said.

“Centerra is reasonably confident that the economic and development benefits resulting from its exploration and development activities will ultimately result in the Water and Forests Law having a limited impact on the company's Mongolian activities,” the firm said.
“There can be no assurance, however, that this will be the case.”

Centerra shares were up 10,02% by 15:00 on Tuesday, at C$18,55 apiece.
Edited by: Liezel Hill

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